This article first appeared in The Edge Malaysia Weekly on August 5, 2024 - August 11, 2024

Rexit Bhd (KL:REXIT), a key software as a service (SaaS) provider to insurance and unit trust companies, has been riding high on the ever-expanding digitalisation wave as its customers continue to integrate digital technology in all areas of their businesses to stay competitive.

Rexit has just reported a record-breaking FY2023, which ended on June 30, with the highest revenue and profit since its debut on the local stock exchange in 2005. Its net profit, which had been hovering around RM9 million to RM10 million between FY2020 and FY2022, jumped from RM9.1 million in FY2022 to RM11 million in FY2023, while revenue hit RM27.3 million, up from RM26.2 million. Profit margins have been between 38% and 40% over those years.

Although the group does not have a fixed dividend policy, Rexit has been paying dividends since a year after its listing. It paid 4 sen per share each year from FY2021 to FY2023.

With its solid financial performance and consistent payouts to shareholders, its return on equity has remained strong and steady in the double-digit range, at 23.19% in FY2021, 20.39% in FY2022 and 23.4% in FY2023. This resulted in a weighted ROE of 22.4% over the three-year period, topping its peers in the technology category for businesses with a market capitalisation of under RM1 billion.

Rexit bagged the Highest Return on Equity Over Three Years award at The Edge Malaysia Centurion Club Corporate Awards 2024, its second consecutive win.

Rexit’s core business lies in providing software and IT services to the financial services sector, particularly the general insurance industry. Its offerings include web-based insurance solutions for front-end marketing and sales as well as back-end operations and management requirements for insurance companies.

The company’s SaaS business model is based on a pay-per-use basis, a cost-effective solution for its clients as there is no need for upfront capital expenditure to purchase the application and its required hardware. The company has also expanded the SaaS model to include the Malaysian unit trust industry, following its appointment by the Federation of Investment Managers Malaysia as the third-party administrator for electronic submissions by its member companies to the Employees Provident Fund.

In its 2023 annual report, Rexit chairman Datuk Ng Kam Chiu says the group’s revenue has been increasing, thanks to the accelerated demand for software customisation services; in line with its clients’ digital transformation initiatives, which include business processes and products; in light of increasing business activities; and the community’s confidence in the reopening of the local economy.

While the group expects FY2024 to be challenging due to global geopolitical risks and uncertainties over global growth, the group appears to be set for another record-breaking year as its earnings have continued to grow.

For the first nine months of FY2024 ended-March 31 (9MFY2024), net profit jumped 40% to RM10.26 million from RM7.34 million in 9MFY2023, as revenue expanded 26.4% to RM24.68 million from RM19.52 million on higher sales of hardware, system software, and software sales and services.

In January this year, the stock hit above RM1 for the first time in three years after the emergence of new substantial shareholders, namely Datuk Seow Gim Shen, Metaco Assets Holdings Sdn Bhd and Bemas Holdings Sdn Bhd. They acquired an aggregate of 92.27 million shares or a 53.27% stake in the company for RM78.43 million or 85 sen per share from three existing shareholders: Rexit Ventures Sdn Bhd (41.2%), Global Hartabumi Sdn Bhd (11.94%) and the company’s current chief executive Datuk Chung Hon Cheong (0.13%). Seow is the chairman of Nasdaq-listed Titan Pharmaceuticals Inc. Metaco and Bemas are investment holding companies.

While the acquisition triggered a mandatory general offer for the rest of the shares in the company, the new major shareholders, who had expressed their intention to keep the company listed, closed the MGO with little change to their shareholdings.

Rexit’s stock price rose 49% from 82.4 sen (adjusted) on March 31, 2021, to RM1.23 on March 31, 2024 — the review period for The Edge Malaysia Centurion Club Corporate Awards 2024. At the time of writing on July 12, the counter was trading at 94 sen, giving it a market capitalisation of RM178 million.

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